Burlington Stores: 3 Months Later Update on BURL Calls

It is a beautiful Tuesday Morning and there has never been a better time to get involved with retail stocks than the holiday season. I am particularly interested in the apparel sector of the retail industry as people prepare to change their wardrobes in anticipation of a new season and as parts of preparations to usher in a brand new year in the next couple of weeks.

Hence, I am starting out with another exploration of possibilities in the options of Burlington Stores, Inc. (NYSE:BURL). Burlington Stores with its market capitalization of $3.35B is a national off-price retailer of branded apparel, operating 503 stores, inclusive of an Internet store, in 44 states and Puerto Rico. The Company offers its merchandise using an Every Day Low Price (EDLP) model with savings up to 60-70% off department and specialty store regular prices.

Update on Previous BURL Coverage

I last wrote about trading BURL Options in a September post in which I recommended buying BURL call options. In that post, I recommended buying the BURL Dec 2014 40.000 call (BURL141220C00040000at an asking price of $3.20. Sequel to that September post, I had earlier recommended a December 2014 $35 BURL call that delivered an impressive 44.82% in 15 days.

Hence, I was confident that the December 2014 $40 call would deliver another impressive round of gains. As at 10:47AM EST today, shares of Burlington Stores were trading up 4.76% to $44.89 per share to mar an 11.08% increase in less than 3 months. The December 2014 $40 call option that I recommended at an asking price of $3.20 was up an incredible 157.18% in less than three months to an asking price of $8.23.

It needs no mentioning that the best options trading move in the said BURL December 40 call is to sell the contract to close since the contract is about 11 days to its expiry. However, I love riding a bull until it dies and I always leave enough room to maximize my profits. Hence, I recommend locking in the profits with Stop/Limit order at $8.18, which would still give is 155.62% in profits if we were to sell at that price.

Strong Q3 Performance Encourages Bullish Moves on BURL

An important factor that confirms the wisdom of staying bullish on Burlington Stores is the quality of the third quarter results that the company posted today. Highlights of the third quarter results are presented below:

Burlington Stores reported net sales of $1.157B to mark an 8.7% increase from the year ago quarter and to beat the consensus estimate of $1.14B.

The company reported an increase in EPS to $0.16 to beat the consensus estimate of $0.12 and to outperform the loss per basic share of ($0.05) from the same period last year

Comparable store sales increased 5.2% and net sales rose 8.7%

Adjusted EBITDA increased 16%, or $10.1 million, and rate improved 40 basis points

Comparable stores inventory decreased 14%, and turnover improved 24%

The company raised its guidance including fourth quarter expectations for comparable stores sales of 3% to 4%, adjusted diluted EPS of $1.25 to $1.28 and increases Fiscal Year 2014 outlook to $1.65-$1.67,

How to Trade BURL Options

I am optimistic about potentials in Burlington Stores and the fact that the company has raised its guidance for the fourth quarter suggests that there’s more upside potential ahead. I recommend buying BURL call options and the BURL Mar 2015 45.000 call (BURL150320C00045000) looks attractive at an asking price of $3.30.


— Daily Option Alerts

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